If you're making any final adjustments to your IT budget for 2003, here's some good news that might convince your CFO to nudge those figures a little higher. In a recent survey of top IT managers by CIO magazine, around half of the 301 respondents stated that they expect a pickup in IT spending this quarter or during 2003. Most of the other respondents stated that their spending has already picked up or never declined in the first place.

The survey, which CIO magazine completed in mid-November, included over 100 respondents from mid-market companies in North America. The table below shows the answers that the study participants provided when asked about an IT spending pickup.

As a whole, the study participants forecasted that their IT budgets will grow at an average rate of 5.1% over the next 12 months. This is a significant increase from the 4.4% rate that the participants forecasted in a similar survey conducted by CIO magazine back in October. It also contrasts sharply with reports from study participants that IT spending for the past 12 months was down 0.5% from the previous year.

When do you expect a pickup in your IT spending?

Making Sense of Spending Surveys

Of course, other research groups have come out with their own studies that paint different pictures of IT spending for 2003. Back in October, Gartner Group released results from its 2002 budget survey, which indicated that 2003 spending would decline by 0.2% after plummeting 7.1% during 2002. By contrast, International Data Corporation recently predicted that worldwide IT spending in 2003 will grow by 9% over 2002 levels and that the recovery will actually begin during the fourth quarter of this year.

Before you throw up your hands in despair over getting a single reliable figure for spending increases, allow me to let you in on a secret. Over the years, I've found that Gartner Group typically underestimates future IT spending while IDC overestimates it. This largely happens because the two groups calculate IT spending in very different ways. Without going into the arcane details of survey methodologies, here is the fundamental difference between the two firms.

• Gartner Group asks its study participants--who are mostly managers of corporate IT departments--to estimate their IT budget for the next year. This budget excludes spending that is outside the control of the central IT department.
• IDC asks its study participants--who are a mix of IT managers and other managers with technology purchasing authority--to estimate their IT spending for the next year. This includes any spending that might take place within the company.

Given these different approaches, it becomes easy to see why Gartner Group's figures would be less optimistic than IDC's figures. Budget forecasts are typically more conservative than forecasts of actual spending; likewise, forecasts that exclude out-of-budget purchases at the departmental level are more conservative than those that include them. As a result, when Gartner Group and IDC talk about IT spending increases, they are really talking about two different things.

While CIO magazine's spending surveys, like those of Gartner, gather information from top IT managers, they do so in a different manner. Gartner Group asks study participants to provide dollar figures for this year's and next year's budget and then calculates the percentage change between the two. By contrast, CIO magazine asks its participants to estimate the percentage that their budget will change over the next twelve months. This simpler and more direct method is, in my opinion, a better way of determining how IT managers think their IT spending levels will change over the next year. As such, I tend to look to the CIO magazine polls as a more reliable indicator of the spending changes that most companies will actually make.

Now that I've provided you with a brief seminar on the games that IT research firms play, you should be better equipped to take those final funding requests down the hall to senior management. Before you do so, however, be sure to check out the article I wrote earlier this year that reveals another spending survey secret. Between these two articles and your own spending calculations, your crystal ball on next year's budget should become a little clearer.

Lee Kroon is a Senior Industry Analyst for Andrews Consulting Group, a firm that helps mid-sized companies manage business transformation through technology. You can reach him at This email address is being protected from spambots. You need JavaScript enabled to view it..